1. Broker Value and Valuing Your Broker Strima 2008 Allen F. Hyman Bickmore Risk Services

2. The Macro Perspective 46 years experience with government 46 years experience with government As an employeeAs an employee 13 yrs. Parks, Recreation & Spec Facilities 13 yrs. Parks, Recreation & Spec Facilities 13 yrs. Safety, Risk, Pool Administrator 13 yrs. Safety, Risk, Pool Administrator As a broker and consultant to governmentAs a broker and consultant to government 20 years 20 years

3. The Micro Perspective End User Procurement Legal Account Executive Broker Wholesaler Underwriter Specialty ProfessionalsCompetitors Constituents

4. What is “Value Added?” If you hired one person to place your insurance who provide no other services until the next renewal, there would be no “added value.” If you hired one person to place your insurance who provide no other services until the next renewal, there would be no “added value.”

5. Where’s the Beef (Value) ? Brokerage Organization Infrastructure Brokerage Organization Infrastructure Market Knowledge/Leverage Market Knowledge/Leverage Marketing Specifications Marketing Specifications Collective Expertise/Placement Pros Collective Expertise/Placement Pros Program/Policy review Program/Policy review Contract Review Contract Review Certificates Certificates Technology Technology Specialty Professionals Specialty Professionals Account Team Account Team Claims Resources Claims Resources

6. Zoom In Benchmarking losses and costs Benchmarking losses and costs Industry knowledge Industry knowledge Tech resources Tech resources Actuarial review Actuarial review 360 perspective for gapless program 360 perspective for gapless program Solution modeling and alternatives Solution modeling and alternatives Market clout Market clout Terms conditions and policy analysis Terms conditions and policy analysis RM consulting RM consulting

7. What is a Broker ? Defining the “broker” and brokerage team Defining the “broker” and brokerage team BrokerBroker AgentAgent Client/ Account ExecutiveClient/ Account Executive Placement Professional (s)Placement Professional (s) Client Service Representative (s)Client Service Representative (s) Senior Relationship ManagerSenior Relationship Manager Industry Practice SpecialistsIndustry Practice Specialists Claims & Loss Prevention SpecialistsClaims & Loss Prevention Specialists

8. What are a Broker’s Objectives ? Brokers want the best possible deal for the client related to terms, conditions and price. Brokers want the best possible deal for the client related to terms, conditions and price. Underwriters expect a negotiated solution with profitable pricing and a partnership. Underwriters expect a negotiated solution with profitable pricing and a partnership. Pricing and terms are always negotiable. Pricing and terms are always negotiable. Application & historical data review are critically important. Application & historical data review are critically important.

9. Broker’s Bidding Challenges Obsolete documents Obsolete documents Boilerplates Boilerplates Requirements (unreasonable?) Performance Bonds Requirements (unreasonable?) Performance Bonds Co-named on E&O Co-named on E&O Cut and paste errors, redundancies and contradictions Cut and paste errors, redundancies and contradictions Unnecessary/voluminous requirements Unnecessary/voluminous requirements Poor data Poor data Open claims Open claims Commoditized purchase attitude Commoditized purchase attitude Buyer lacking necessary understanding Buyer lacking necessary understanding Time constraints Time constraints Insufficient opportunity for negotiations Insufficient opportunity for negotiations Open market offerings Open market offerings Unclear objectives/service expectations Unclear objectives/service expectations What and who to include in the oral presentation What and who to include in the oral presentation What is driving the award What is driving the award

10. How are Brokers Compensated Does compensation drive deals? Commissions Commissions Used to be sufficient to cover all costs & profitUsed to be sufficient to cover all costs & profit Where does commission come from?Where does commission come from? Negotiated with underwritersNegotiated with underwriters May still be in the clients best interestMay still be in the clients best interest Impossible to determine true net quote Impossible to determine true net quote Should be disclosed from all sourcesShould be disclosed from all sources Historically range from 5 - 25+%Historically range from 5 - 25+% Front end/back end issuesFront end/back end issues

11. How are Brokers Compensated Does compensation drive deals? Fees Fees Client budget line itemClient budget line item Create internal issues in brokeragesCreate internal issues in brokerages Can generate skin and bones serviceCan generate skin and bones service May lead to front end promises/ back end non-deliveryMay lead to front end promises/ back end non-delivery Fee/Commission offsetsFee/Commission offsets Change in Scope of ServicesChange in Scope of Services Duration issuesDuration issues

12. High Bidder versus Low Bidder WHY?

13. Broker Behind the Scenes Historical Perspective Historical Perspective Perception of Government Procurement Perception of Government Procurement Pricing of Services Committees Pricing of Services Committees Team brainstorms Team brainstorms Fee Models Fee Models Profitability/ Opportunity Cost Profitability/ Opportunity Cost SWAGs SWAGs Size of the book Size of the book Service expectations Service expectations Dividing the pot Dividing the pot Competitive environment Competitive environment Value Added Value Added Internal preparation of proposals Internal preparation of proposals Market relationships Market relationships Incumbent advantagesIncumbent advantages Many important questions are not asked in pre-bid meetings. Many important questions are not asked in pre-bid meetings.

14. When Price Drives…. Insurance solution may be diluted Insurance solution may be diluted Services may be limited Services may be limited Internal charges often affect servicesInternal charges often affect services Underwriters do not believe a relationship exists Underwriters do not believe a relationship exists For many reasons, underwriters want time with a insuredFor many reasons, underwriters want time with a insured

15. When Service Drives Bottom line does not steer the proposal Bottom line does not steer the proposal But it is factored inBut it is factored in Underwriters feel differentlyUnderwriters feel differently Broker feels partnership is strongerBroker feels partnership is stronger Client expectations need to be clearClient expectations need to be clear Performance measures should be createdPerformance measures should be created

16. Recommendations Decide what you are buying? Decide what you are buying? Review the bid documents in advance of release. Review the bid documents in advance of release. Clarify drivers and priorities in the offering. Clarify drivers and priorities in the offering. Take the time to create scope of services – even one year out. Take the time to create scope of services – even one year out. Understand market conditions before bidding. Understand market conditions before bidding. Create the best possible package of data. Create the best possible package of data. Consider needs and desires of sellers. Consider needs and desires of sellers. Coach procurement well in advance of offering. Coach procurement well in advance of offering. Demand disclosure. Demand disclosure. Consider stronger relationships with all component players. Consider stronger relationships with all component players. Making an RFP complex does not assure a better outcome. Making an RFP complex does not assure a better outcome. Conceptual proposal vs. conceptual/creative section Conceptual proposal vs. conceptual/creative section